interim results - home | brand architekts group plc

March 2021

Interim Results

Half Year Results

Quentin HighamChief Executive Officer

Quentin joined as CEO on 4 May 2020.

He was previously Managing Director of Yardley of London Ltd/Wipro Consumer Care between 2010-2020.

Prior to that, he was Marketing Director at Coty, with responsibility for the Rimmel cosmetics brand; UK Brand Director at Swatch between 1999-2001 and Head of UK Marketing at global cosmetics company, Revlon between 1992-1999.

In addition, he has first-hand knowledge of our brands having been Commercial Director between 2002 and 2006 at KMI brands with responsibility for the Fish brand and King of Shaves.

Tom CarterChief Financial Officer

Tom joined as CFO on 22 June 2020.

Tom was previously Group Finance and Operations Director at Technetix Group Limited, a market leading technology company.

Prior to that, he was Regional Business Controller at Alliance Boots, Financial Controller at Sky Media and Finance Manager at Procter and Gamble.

Tom qualified as a Chartered Accountant at Pricewaterhouse Coopers and is also an Oxford Graduate with a Masters in Modern Languages.

Presenting today

2Brand Architekts Group plc | Half Year Results

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Brand Architekts is a British beauty challenger brand business that is focused on:

- Insight led brand development

- Ethical and efficient sourcing and 3rd party manufacturing

- Omni-channel routes to market

- Creating noise and buzz

- Brand invigoration

Half Year Results Brand Architekts Group plc | Half Year Results

Overview

Overviewof the period

Brand Architekts Group plc | Half Year Results 5Half Year Results

Tightening of restrictions has meant we have continued to be impacted by fluctuating demands of customers and end-consumers

Brexit placed further stress on our manufacturing lead times, given freight container shortages and paperwork delays at UK ports for Asian manufactured stock and imported componentry

Notwithstanding this, we have successfully pushed ahead with key tenets of our strategy. Key achievements include:

Expected 5-year appointment of Global leading e-Commerce providers, asour new direct-to-consumer (DTC) partner, who will work in creating andlaunching a new market place in July 21

Capitalising on Super Facialist +50% sales growth, created atransformational and integrated above the line (ATL) campaign to runfrom May 21- March 22.

Developed a communication program to effectively market five brandrelaunches and new product development (NPD) program from Mayonwards.

98% of all products are 100% recyclable; all NPD will utilise a minimum30% post consumer recycled plastic (PCR); all UK sourced card and outerpackaging is Forest Stewardship Council (FSC) certified.

£1m improvement in Net Cash to £19.0m

Profit Before Tax Net Cash

H1 2021: £19.0m

H1 2020: £15.0m

FY 2020: £18.0m

E-Tail / DTC

Financial Highlights

Underlying Operating ProfitGross Profit Margin Net Sales

16.3

10.0

FY20 H1 FY20

9.0

H1 FY21

-10%

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H1 2021: 39%

H1 2020: 38%

FY 2020: 35%0.1

1.2

FY20 H1 FY20

0.8

H1 FY21

-0.4

-4.4

0.3

0.4

FY20

H1 FY20

H1 FY21

+0.1

1.4

0.4

0.9

FY20

H1 FY20

H1 FY21

+125%

Half Year Results Brand Architekts Group plc | Half Year Results

10.6

-0.6

10.0

-0.1-0.6

H1 FY20 LFL Adj H1 FY20 Adj Non-recurringIP Revenue

Gift

-0.8 0.3 0.2

9.0

Covid E-Tail DTC Total

-1.0

Net Sales H1 FY21 vs H1 FY20

7Half Year Results

• Like for like adjustment to revenue to rebase from 28 week to 26 week trading period

• IP Revenue – (£0.1m) one off income from co-existence agreement signed in Q2 FY20 for Alive brand

• Covid impact on Xmas Gift (£0.6m) and (£0.8m) on non gift sales in particular to High Street retailers

• E-Tail / DTC - £0.5m increased sales partially offset Covid impact

Brand Architekts Group plc | Half Year Results

Cash H1 FY21 vs H1 FY20

21.2

-2.1

-1.1-0.2

19.0

0.6

CapexPensionFY20 Net CashInvoiceFactoring

LoanFY20 GrossCash

0.8

OperatingProfit

-0.1

WorkingCapital / Tax

18.0

H1 FY21 NetCash

+1.0

8Half Year Results

• Loans – (£3.2m) repayment of outstanding term loans and invoice factoring in Q2

• Pension - (£0.2m) contributions to defined benefit pension scheme

• Capex - (£0.1m) investment in IT systems and Trademark registration

• Working Capital / Tax -£0.2m net inflow from lower working capital (inventory) & £0.4m PY tax on account repayment


Strategy Review

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Operational efficiency Optimising our portfolio Channel development Environmental & social responsibility

Acting responsibly is not only the right thing to do; it makes our business a better partner for our retail customers, and a choice that our end-consumers feel good to make.

– Implementation and integration of sophisticated EPOS & IRI dashboards

– Demand Planning system, Business Intelligence application and Approval Management portal scheduled for implementation in H2

– Stock reduction programme reducing total inventory balance by £1.5m over the last 6 months

Omni-channel and UK retailer-exclusive

brands. Available on the high street in

leading pharmacy and drugstore chains;

national grocery stores; e-tailers; and

through our own e-commerce websites

Further investment in new financial

control systems for the transition to a

fully functional consumer centric

brands-only business

“Fewer, Bigger, Better” Rationalise brand & product line up. Relaunch all non performing brands within 2021. Support all omnichannel brands with relevant marketing programs

– Redesigns and relaunch strategies for several our brands have been created

– Relaunches to take place in H2, with the timing dictated by customer purchasing cycles

– Committed to launching largest marketing campaign to date for Super Facialist in H2

– Appointed a retained marketing agency to support our brand relaunches and key selling periods

– Sales from D2C have grown by over 400% YTD, against a very low initial base

– Post period reached a 5-year agreement with one of the world’s leading e-Commerce & fulfilment providers

– Good progress embedding principles from our Sustainability Blueprint across the business and supplier partners

– 90% of NPD lines will contain a minimum of 30% PCR

– 98% of our lines will be 100% recyclable

– UK sourced secondary packaging and outers made of FSC certified board

– 99% gift sets secondary packaging made of recyclable materials and feature a recycle logo

Half Year Results

Update on strategic priorities and growth plan

Super Facialist

11Half Year Results

Brand has performed well to date +50% in H1 and has captured the zeitgeist of consumers wanting facial treatments at home. Distribution gains in Waitrose and Morrisons in H1, with more gains confirmed for H2.

Integrated media campaign will see a mix of video, social and digital deliver a minimum reach of 35% of ABC1 women aged 25-54 at an average frequency of 4.4.

The proposed May 21-March 22 campaign has been very well received by both our customers and consumers.

We are confident that the increased investment will act as a catalyst for the significant brand growth over the next 18 months.

DTC

12Half Year Results

Having explored several options & 3 months of due diligence, reached provisional agreement with one of the world’s leading e-Commerce & fulfilment providers

The proven ecommerce platform reduces risk; its extensive logistical operation makes it very cost efficient, and it has the capabilities for fast and easy International expansion

Over next 6 months will be working closely with their content production and performance marketing teams to design and launch our new marketplace in Q1 of the next fiscal

This investment will allow us to become a truly omni-channel business and in line with our Project 50 aspirations, enable us to grow our DTC sales to £10m+ over 5 years, whilst also being margin accretive.

M&A

13Brand Architekts Group plc | Half Year Results Half Year Results

The Board has assessed multiple and wide-ranging possibilities in detail, which we have declined, either due to strategic fit or valuation expectations

Appetite for the right acquisition remains undiminished but will not be done at any cost

Levels of activity give us confidence that progress will be made in this regard, but timing is difficult to predict

Any strategic acquisition will need to further strengthen the Group’s areas of core competence – category (Skincare; Haircare; Bath & Body); channel & consumer, or address areas of weakness, such as any needs gaps i.e. DTC; product; customers; and International reach.

Acquisition criteria:

01

Any acquisition will need to take into consideration current & future consumer behaviour; consumption and proprietary technology and/or product POD.

Any single brand acquisition would need to have scale, if it were predominantly bricks & mortar or be readily scalable, if it was relatively young and DTC .

02

03

Outlook

Macroeconomic environment looks set to remain uncertain for the remainder of the year

This year is one of consolidation, transition and putting in place strategic building blocks for a transformational 2021/22

Focus in H2 is to land the 5 brand relaunches; deliver the transformational ATL campaign; continue to progress omni-channel distribution gains and lay the foundations for the creation and implementation of our be-spoke DTC market-place.

Investment in H2 from our operating cash flow in these initiatives will drive growth from FY 2021/22 onwards

Continue to explore M&A opportunities that are complementary to Project 50.

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02

03

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Brand Architekts Group plc | Half Year Results Half Year Results

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Appendices

Appendix - Group P&L

16Half Year Results Brand Architekts Group plc | Half Year Results

£'000

Brands Central TOTAL Brands Central TOTAL

Revenue 9.0 9.0 10.6 - 10.6

Cost of sales (5.5) (5.5) (6.6) - (6.6)

GROSS PROFIT 3.5 3.5 4.0 - 4.0

39% 39% 38% 38%

Commercial & administrative costs (2.1) (0.8) (3.0) (2.3) (0.8) (3.1)

OPERATING PROFIT before exceptional items 1.4 (0.8) 0.6 1.6 (0.8) 0.9

Exceptional costs (0.0) (0.0) (0.0) (0.1) (0.3) (0.5)

OPERATING PROFIT 1.4 (0.8) 0.6 1.5 (1.1) 0.4

Finance Income - 0.0 0.0 - 0.0 0.0

Finance Costs (0.0) (0.1) (0.1) (0) (0.1) (0.1)

PROFIT BEFORE TAXATION 1.4 (1.0) 0.4 1.5 (1.2) 0.3

Underlying operating profit:

Add back:

Exceptional Items 0.0 0.0 0.0 0.1 0.3 0.5

Amortisation of Acquisition Related Intangibles - 0.1 0.1 - 0.1 0.1

Net Interest 0.0 0.1 0.1 0.0 0.1 0.1

LTIP 0.0 0.1 0.1 - 0.2 0.2

Underlying operating profit 1.4 (0.6) 0.8 1.6 (0.5) 1.2

FY21 H1 FY20 H1

Appendix – Group Balance Sheet


£'000 FY21

H1

FY20

H1

FY20

Full Year

Tangible fixed assets 0.1 0.2 0.1

Intangible fixed assets 11.6 12.8 11.7

Deferred tax assets 2.5 1.9 2.5

Total non-current assets 14.3 14.9 14.4

Inventories 2.3 6.2 3.7

Trade & other receivables 5.0 8.3 4.0

Cash and cash equivalents 19.0 20.0 21.2

Current tax receivable 0.4 0.6 0.8

Total current assets 26.7 35.0 29.8

Trade & other payables 3.1 5.9 4.5

Loans & borrowings 1.1 1.0

Current tax payable 0.0 0.3

Total current liabilities 3.1 7.2 5.5

Loans & borrowings 1.5 1.1

Pension obligations 13.2 9.5 13.2

Deferred tax liabilities 1.2 1.0 1.2

Total non-current liabilities 14.3 12.1 15.5

NET ASSETS 23.5 30.6 23.1

Share capital 0.9 0.9 0.9

Share premium 12.0 12.0 12.0

Re-measurement of pension liability (10.7) (7.5) (10.6)

Retained earnings 21.2 25.1 20.7

Subtotal equity 23.3 30.4 23.0

Non-controlling interest 0.1 0.2 0.1

TOTAL EQUITY 23.5 30.6 23.1

Appendix – Group Cash Flow


£'000 FY21

H1

FY20

H1

FY20

Full Year

Cash and cash equivalents at beginning of period 21.2 0.4 0.4

Profit excluding depreciation, amortisation and net finance cost 0.8 6.9 3.7

(Increase) in inventories 1.5 (1.0) 1.5

Net (decrease) in trade & other payables (0.3) 1.0 0.9

Net (increase) / decrease in trade & other receivables (1.0) (3.5) (0.5)

Purchase of fixed assets (0.1) (0.1) (0.1)

Loans repayments (3.2) (2.6) (4.3)

Net finance expenses paid (0.1) (0.0) (0.1)

Tax paid 0.4 (0.6) (0.8)

Dividends paid - (0.8) (0.8)

Contributions to defined benefit pension plan (0.2) (0.2) (0.3)

Impact of disposal of manufacturing business - 20.5 21.8

Increase / (decrease) in cash and cash equivalents (2.2) 19.6 20.9

Cash and cash equivalents at end of period 19.0 20.0 21.2

Net cash / (debt) at start of period 18.0 (7.2) (7.2)

Increase / (decrease) in cash and cash equivalents (2.2) 19.6 20.9

Net cash outflow/(inflow) from decrease/(increase) in borrowings 3.2 2.6 4.3

Net cash / (debt) at end of period 19.0 15.0 18.0

Distribution Matrix

March 2021

20E-COM – Current distribution

SUPER FACIALIST

DIRTY WORKS

DR SALTS

KIND NATURED

HAPPY NATURAL

FISH

MR

ARGAN +

SenSpa

THE SOLUTION New New New

BEAUTOPIA

RSC

ROOT PERFECT

= Launched

= H2 discussions


SUPER FACIALIST New New

DIRTY WORKS

DR SALTS

KIND NATURED

HAPPY NATURALS

FISH

MR

ARGAN +

SenSpa

THE SOLUTION

BEAUTOPIA

RSC

ROOT PERFECT

GROCERY – Current distribution Brand Architekts Group plc | Half Year Results 21

SUPER FACIALIST

DIRTY WORKS

DR SALTS

KIND NATURED

HAPPY NATURALS

FISH

THE SOLUTION New

MR

ARGAN +

SenSpa

BEAUTOPIA

RSC

ROOT PERFECT

HIGH ST – Current distribution Brand Architekts Group plc | Half Year Results 22

Replace, Respect, Support

1. Replace

▪ Committed to use ingredients that do not endanger our eco system in the way they are produced or harvested

2. Respect

▪ Working with manufacturers, raw material suppliers that are members of recognized organisations supporting ethical trading, sustainability and activism

3. Support

▪ Working toward becoming a member of a recognized organisation

4. Avoid

▪ Working towards a list of ingredients we do not want to use

Blueprint Code Of ConductsPACKAGING RAW MATERIALS

Reduce, Recycle, Remove, Replace, Respect

1. Reduce

▪ The content of virgin plastic in all our products 98% NPD 30% PCR

▪ Our use of power, water and optimise shipping methods

2. Recycle 100%

▪ all products labelled appropriately to facilitate recycling at home

▪ Packaging information broken down to better understand whether they are recyclable

▪ For labelled products, label and primary material are the same

▪ Working in partnership with our suppliers to recycle our products/ wastage through their outlets/schemes

3. Remove 100%

▪ Eliminate single use plastic – for example vac trays and windows in giftsets

▪ Remove black plastic from existing products (find alternatives i.e. black pigment)

4. Replace

▪ Replace plastic where possible for other biodegradable materials i.e. FSC sourced boards 98%

▪ Move to friendlier inks and finishes

5. Respect

▪ Respect our natural resources by making sure our products come from ethical suppliers

▪ People and Planet i.e. Citizen day, clean public areas, plant trees initiatives by employees

Our Code Of Conduct

23Brand Architekts Group plc | Half Year Results

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